It takes just "one extra snowflake to start an avalanche — and boom!" Indeed, according to Harry S. Dent Jr., aka The Contrarian's Contrarian, flurries could come in July: The ever-building market bubble is likely to "blow at the end of this month, if not September," predicts Dent in an interview with ThinkAdvisor.
Stocks have no place in investors' portfolios, he argues, forecasting that most equities will plummet 80% by autumn.
"It will be the biggest crash of our lifetime," he predicts. "The worst year for the stock market in our lifetime is likely to be around the end of 2022 and for the economy, 2023."
The economist correctly called Japan's 1989 bubble bust and recession, the dot-com crash and the populist support that catapulted Donald Trump into the White House.
In the interview, the author of "What to Do When the Bubble Pops: Personal and Business Strategies for the Coming Economic Winter" (G&D Media-April 2020) zeroes in on a specific strategy and timing he recommends for selling equities and buying them back or acquiring new ones.
"You'll never see an opportunity like that again," he enthuses.
Investors remain "bullish longer term, but the economy keeps telling us things aren't as good as they used to be.
"The economy isn't the same, idiots! The current economic rebound won't last," declares Dent, who in the interview discusses what he sees as the first sign of a downturn.
He heads the research firm of HSD Publishing, which produces monthly newsletters that he and Rodney Johnson, HSD president, each write.
"It will take one more crash to convince" investors that the economy isn't as robust as they think it is, says Dent, who publishes his insights in a free daily e-newsletter.
He isn't entirely gloom and doom about what's on the way. He has high hopes for Bitcoin — but after it plunges 90% to 95%.
In the interview, Dent reveals his personal investing strategy for the digital currency.
ThinkAdvisor held a phone interview with Dent on July 7. He was speaking from his base in San Juan, Puerto Rico. Upcoming: a free "Financial Prophecy Summit" webinar July 20-22, in which Dent and Robert Kiyosaki forecast the economy.
Here are highlights of our interview:
THINKADVISOR: What worries you about the market and economy right now?
HARRY S. DENT JR.: I'm not afraid or worried about what's going to happen. It's just the wait. I'm waiting for the economy to get back to normal and quit having central banks manipulate and stimulate it like a drug pusher with a heroin addict.
They're going to keep stimulating and doing whatever it takes to try to keep this bubble. But you can't just keep pumping money and pushing up financial asset prices. We now have a bigger bubble than ever.
Investors are still bullish longer-term. But the economy keeps telling us, no — things aren't as good as they used to be. Look how much stimulus it's taken to grow at 1.6%!
The economy isn't the same, idiots! But people are still assuming it is. It's going to take one more crash to convince them.
No amount of stimulus is going to cure this, and investors lose.
What's your outlook for the stock market, then?
This is the longest bull market and the most bubbly. When this thing goes, it's going to go big.
It will be the biggest crash of our lifetime. The central banks will lose control. The worst year for the stock market in our lifetime is likely to be around the end of 2022 and for the economy, 2023.
You told me in an interview this past March that "the biggest crash ever" would likely occur by the end of this June. What are your thoughts on why that didn't happen?
It's the same old story: We've been rebounding since COVID crashed us in March of last year. The stimulus was off the reservation! The central banks said, "We'll triple down." But that stresses the system: not letting the economy rebalance, not washing out zombie companies. Twenty percent of large public companies can't meet their debt service.
So it was massive stimulus and the natural recovery — [Americans] had to hold back [spending] for months. So now we have this bounce.
We've been rebounding since COVID crashed us in March of last year. But I don't think it's going to last, and the markets don't think it's going to last. The bond markets are saying, "Yeah, now we've got 3% or 4% inflation, but it's temporary."
Governments will keep this bubble going no matter what. So the question is: When does it blow?
When does it blow?
I think the end of this month is one of the most likely times, if not September. It's pretty hard to hold this thing up, and the biggest reason is home sales, which is the single most important thing that we buy.
Housing is the biggest part of the economy. If sales keep slowing, then prices get weak. That's the type of thing that tips this thing over.
What I'm seeing No. 1 right now is that prices on home sales have gone down. Real estate is still bubbling up, but U.S. home sales have gone down 22% or 23% in just a matter of the last five or six months. That's a sign there's a limit to the bubble.
So that's the beginning. But the downturn is going to be hard and fast because the economy is way overstretched, including low interest rates. People just assume this is going to last forever, but when it hits, it's going to hit hard.
How much snow does it take for an avalanche? One snowflake — because it's been building up and building up. One extra flake — and boom!
Please elaborate on your inflation forecast.
